Financial and

--3 A Volvo Fact Book ANKOM

··~ ~~-~ Financial and

~ perating Statistics 1990/91

VOLVO

Volvo Financial and Operating Statistics

Note to the reader

Only minor changes have been made in the present edition of Volvo Financial and Operating Statistics. For changes in accounting principles affecting Consoli- dated Financial Statistics, please note comments on page 10.

We hope that you will find this year's issue to be of hel p in forming your view of Volvo's total operations and welcome your comments and suggestions for forther improvements of this publication.

First quarter figures for 1991 and major events up to the end of J une, 1991 are included.

June 30, 1991

In the financialstatements and accompa- nying tables in the nates, parentheses are osed to indicate negative figures. In the narrative text, parentheses enclose fig- ures related to 1989 operations.

All amounts are in millions of Swedish kronor (SEK M) uniess otherwise indi- cated.

Figures in Swedish kronor (SEK) may be translated at the approximate 1990 year-end exchange rates as follows:

GBP 1 .00 = SEK 10.81 USD 1.00 =SEK 5.69

- - -

DEM 1.00 = SEK 3.75 FRF 1.00 = SEK 1.10 BEF 1.00=SEK 0.18

- -

CHF 1.00= SEK 4.39 NLG 1.00 = SEK 3.32

- - -

During the years 1980-1990 annual rates of inflation in Sweden, based upon the Consumer Price Index published by statistiska Centralbyrån, were as follows:

1980 14 percent 1986 3 percent 1981 9 percent 1987 5 percent 1982 19 percent 1988 6 percent 1983 9 percent 1989 7 percent 1984 8 percent 1990 11 percent

- - - 1985 6 percent

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Volvo in brief

Page

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Hi~tory ami business Investment in Procordia The Volvo/Renault Alliance Volvo Group Structure Summary of Ba<,iness Recent Development'i Produchon facilities Capita] Expenditures and Reseruch and De"elopment Sales organization Supplien;

Personnel Environmentai policy for the Volvo Group

- -- - - - -- - -

Financial Statistics, Consolidated 9

Finanemi statements Capita] expenditurcs Rec;earch aod development costs Sales, income, assets by operating r.ector and market area Keyfinancial ra tios Capitaliz.ation

- - - -· - - - ··----

--- - - Share capitalandshare data 21

-· - - - -- - - - - --- - - -

Operating Statistics, Consolidated 25

Range of products Production, sales, regi~ttahons

Number of employces Salaries and vvages World production of vehicles

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^---- - -

Administration 35

Volvo's top organization Board of Dircctors and Auditors

Volvo in Brief

History and business

Volvo, which in 60 years has grown to be the largest industrial group, measured by sales, in the Nordie region (Sweden, Nor- way, Denmark, Finland and Iceland), began operations as a ear manufacturer.

Volvo was incorporated in 1915 as a subsidiary of AB SKF, the Swedish ball bearing manufacturer. It began assemb- ling cars in 1926, and trucks in 1928, and became an independent company in 1935.

Following three years of development work, the first series- produced Volvo rolled out of the Hisingen plant in Göte- borg in April1927. A year later the first cars were exported to Finland.

The original productian models were designed to withstand the rigaurs of Sweden's rough roads and cold tempera- tures. This emphasis on durability has been a feature of Volvo products ever since.

Following the acquisition in 1931 of Sköfde Gjuteri och Mekaniska Verkstad AB, which manufactured engines for the Volvo vehicles, the Company developed its business from an assembly to a manu- facturing operation. This was the first of a number of acquisitions of manufactur- ing companies, forming the foundation for the development of the Volvo Group.

In 1941 AB Volvo acquired a majority holding in Svenska Flygmotor AB (now Volvo Flygmotor AB). Köpings Mekaniska Verkstads AB was acquired in 1942, AB Bolinder-Munktell (later Volvo BM AB, now part of VME Group NV) in 1950, and Olofström AB (now part of Volvo Car Corporation) in 1969.

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In the 1960s Volvo's Swedish ear as- sembly operations and Corporate Head- quarters were transferred to a new cam- plex at Torslanda, Göteborg, Sweden, where Volvo still has its headquarters and its largest plant.

In the beginning of 1973 Volvo acquired a part-ownership in DAF Car BV (later Volvo Car BV), the Netherlands. Today, Volvo owns 30 percent of Volvo Car BV and the Dutch Government holds the bal- ance. Volvo Car BV has achieved an in- dependent position but conducts its oper- ations in close cooperation with Volvo Car Corporation. (See also Recent De- velopments page 5.)

Through acquisitions during the first part of the Eighties Volvo acquired a ]arge number of food campanies which were brought tagether within the Provendar Group, the former Food operating seetar of Volvo. In 1989, with a view to strength- ening the Swedish food and pharmaceu- tieal industry, Volvo, the Swedish Govern- ment and Proeardia agreed to combine operations within Procordia. Under terms of the agreement Volvo divested its food operating seetar in J une 1990 to become, the principal industrial owner ofthe ex- panded Proeardia group.

Today Volvo isengagedin a broad range of actlvities in the transport vehicle field, with Cars, Trucks and Buses as its largest operating sectors. Other seetars include Marine and industrial engines and Aero- space (aircraft andspace engines).

Volvo's industrial operations provide the base for the Group's financial aetivi- ties, which are coordinated mainly through wholly owned finance companies.

An important part of the Group's assets is in the form of large holdings in associated companies, man y of them publicly traded.

There has been a considerable broad- ening and internationalization of Volvo's operations during the past decade. More than 80 percent of Volvo Group sales are to enstomers outside Sweden, mainly in Western Europe and North America.

In addition to its productian resourees in Sweden, the Group has a self-sufficient truck operation in the United States and well-established productian of cars, trucks and buses within the European Communi- ty. A large number of trucks and buses are also produced in Brazil.

Volvo has a strong trademark. lt stands for quality, safety and durability, for ens- tomer care and cancern for the environ- m€nt.

Volvo's strategy in each of its oper- ating seetars is to concentrate on distinct products and market segments. Substan- tial investments are continuously made in product development, improved pro- ductian systems, marketing, enstomer service and logistics.

The Volvo organization is based on shared values and far-reaching delegation of responsibility. There are only slightly more than 100 employees in the Corpo- rate Headquarters office. Allline oper- ations have been deeentralized to subsidi- aries in Sweden and other eountries.

The alliance with Renanit of France is stimulating and strengthening Volvo's Cars, Trucks and Buses operating sectors.

During the past few years Volvo has focused on creating a major alliance that would allow Volvo to maintain its inde- pendenee while strengthening its com- petitiveness.

As a part of this effort, discussions were initiated with the Renault group of France in early 1989. In September 1990, these negotiations resulted in the signing of an agreement leading to world-seale cooperation in the ear, truck and bus operating sectors.

The cooperation invalving procure- ment, research and development pro- grams and coordination of investment plans is expected to result in benefits of large-scale operations and greater com- petitiveness for the two groups.

The structure of the Volvo Group has changed significantly during 1990 and 1991 as a result of the transactions with Proeardia and Renault.

Volvo's industrial operations are now being concentrated in the transport vehicle field. At the same time, Volvo's ineome will be substantially affected by its share of earnings from Renault' s ear, truck and bus operations and from Procordia.

At year-end 1990, Volvo had 68,800 employees, of whom 47,300 were in Sweden and 21,500 in other countries.

Volvo has approximately 169,000 shareholders. Its shares are traded on stock exchanges in Stockholm, Tokyo, London, Frankfurt am Main, Dusseldorf, Hamburg, Paris, Zurich, Basel, Geneva, Brussels, Antwerp, Oslo and Helsinki, and in the United States via NASDAQ.

Volvo in Brief

Investment in Procordia

The agreement reached in December 1989 between Volvo, the Swedish Govern- ment and Proeardia to unite Procordia, Provendar and Pharmacia in a new group was implemented in J une 1990.

Under the terms of the agreement, Volvo exchanged all of its Provendar AB and Pharmacia AB shares for a hold- ing equal to 43 percent of the share capi- tal and 39 percent of the voting rights in Proeardia AB. Volvo sold 10 million Proeardia Class "B" shares at the end of January 1991. A conversion of shares has been effected in such away that Volvo and the Swedish Government have equal voting rights, 42.7 percent

The enlarged Proeardia group has operations in pharmaceuticals/biotech- nology, food and services and h ad sales of SEK 36,567 million in 1990 and in- come before allocations and taxes amoun- ted to SEK 1,105 million. Proeardia has thus become the leading company in the Nordie region in pharmaceuticals/bio- technology and in the food sector.

Volvo's share ofincome in Proeardia is included in the Volvo Group accounts

effective July l, 1990. Sales and income of the Provendar Group (the former Food Operating sector), as weil as Volvo's share of income in Pharmacia, is included for the first six months of 1990.

The Volvo/Renault Alliance

In January 1991, the alliance between Volvo and Renault was established through an exchange of shares between the two groupsand start-up under the implementing agreements. The alliance is based on a structure of cross-owner- ship in Volvo's and Renault's cars, trucks and bus operations.

Volvo's share ofincome in Renault and Renault's minority interest in Volvo's in- come are included in the Volvo Group Income statements as from 1991.

Objective. The objective of the coopera- tian is to strengthen the competitiveness of each group through technical and in- dustrial cooperation in ear, truck and bus operations. The cooperation is intended to enable Volvo and Renault to distribute costs of product development, as weil as capita! expenditures, over alarger nom- ber of produced units. Volvo's presence within the EC will be strengthened and conditions for participation in the on- going restructuring of the automotive industry will be improved.

Through the alliance, Volvo and Renault is the world's largest industrial group producing heavy trucks and the Iargest bus manufacturer in the OECD countries, as weil as one of the world's largest producers of passenger cars.

Productian and marketing will not be directly affected. The two groups will cooperate in research and product devel- opment, primarily in the areas of ad- vanced engine and component technol- ogy, and in procurement of components.

Industrial resources will also be utilized more efficiently through coordinated in- vestment plans, tagether with basic long- term research and technical development airned at sharing costs.

Exchange of shares. In January 1991, fol- lowing the appropriate shareholder and regulatory approvals, the alliance was implemented through an exchange of shares between Volvo and Renault.

• AB Volvo acquired 20 percent of the share capita! and voting rights in Regie Nationale des Usines Renault S.A. (in which the cars seetar of Renault is in- cluded).

• Regie Nationale des Usines Renault S.A. acquired 25 percent of the share capita] and voting rightsin Volvo Car Corporation;

• AB Volvo acquired 45 percent of the share capitaland voting rightsin Renault Vehicules Industriels S.A. (Renault V.I.), which is responsible for Renault' s truck and bus operations; and

• Regie Nationale des Usines Renault S.A. acquired 45 percent of the share capita! and voting rights in Volvo Truck Corporation.

• In addition, Renault plans to acquire in the open market AB Volvoshares rep- resenting ten percent of its voting rights and capital. Renault has as of mid-June, 1991 purchased AB Volvoshares rep- resenting 7.4 percent of the voting rights and 6.3 percent of the share capital.

Cooperation projects. There are far- reaching plans for cooperation in the manufactoring of components and en- gines. For example, negotiations are pending with regard to the supply of gaso- line engines by Volvo to Renault be- ginning in 1993. It is also planned to equip certain Volvo models with Renault diesel engines.

A comprehensive survey has been made with respect to the capabilities of Renault V.I. and Volvo Truck Corpora- tion in various areas of truck operations.

These studies show a substantial poten- tial for cooperation in the field of drive train components, among others.

Volvo Bus Corporation, Renault V.I.

and Heuliez Bus, on e of France's leading makers of bus bodies, have entered an agreement of cooperation. Under terms of the agreement, Heuliez, in addition to continning its cooperation with Renault, would also build buses on Volvo bus chassis.

A nomber of coordination projects have already been started. Volvo and Renault have, for example, appointed 16 common purchasing executives, each responsible for a product area within the ear sectors, to coordinate procurement by the two companies.

In addition to Volvo cars, the Renault 19 Chamade is now being assembled in Volvo's local assembly plants in Thailand and Malaysia for sale in markets in South- east Asia.

Volvo and Renault have also coordi- nated the logistics invalved in the trans- port of vehicles from factodes to im- porters in the European market.

As the first step of man y projects in thefinancialservice area, Volvo and Renault have formed a jointly owned sales-finance company in Italy in order to provide financial support to dealers and end eostomers of each company in that country.

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Volvo in Brief

Volvo Group Structure, J une 1991

Subsidisries

Associsted Campanies

Automotive lndusrry

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Effective in 1991, as a result of the trans- actions with Renault and Procordia, the structure of the Volvo Group has changed significantly.

The new Group structure. Beginning in 1991, Volvo's automotive vehicle opera- tions are characterized by the cross- ownership structure that forms the base for the alliance with Renault. Accordingly, as shown in the chart above, Volvo owns 20 percent of Regie Nationale des Usines Renault S.A. and 45 percent of Renault Vehicules Industriels S.A Correspondingly, Renault owns minority interests in Volvo Car Corporation (25 percent) and Volvo Truck Corporation (45 percent).

Volvo's industrial operations invalving Marine and industrialengines and Aero- space continne to be wholly owned by Volvo, along with Volvo's financialand insurance activities.

In addition, Volvo has substantial

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Other operations

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and pharmaceutical seetars (Procordia), in the construction equipment field (VME), and in other associated campa- nies in which Volvo's holdings range from 20 to 50 percent

Restructuring of the V o Ivo Group. The Volvo Group is being substantially re- structured during 1990 and 1991 with the objective of bringing to gether within Volvo Car Corporation and Volvo Truck Corporation all operations invalving the Cars, Trucks and Buses sectors. In this connection, the biggest change has been in the marketing companies; in most countries they have been divided into ear and truck units and assigned to the re- spective parent company in each opera- ting sector.

Effective January l, 1991, Volvo Bus Corporation is a subsidiary of Volvo Truck Corporation. Operations within Marine and industrialengines have been assigned to AB Volvo Penta.

Summary of Business

Cars. The ear business within Volvo in- cludes the design, manufacture, assembly and marketing of a wide range of quality cars: prestige models, upscaled medium- size family cars, smaller family cars and a sports model. In 1990, Volvo cars ac- counted for slightly less than two percent of new ear registrations in Western Europe and one percent of all cars sold in the United States.

Volvo cars are manufactured mainly through Group subsidiaries at four principal assembly plants, three of which are in Sweden. The smaller ear Iines are manufactured in the Netherlands by Volvo Car BV.

In January 1991, AB Volvo acquired a 20-percent interest in Renault's parent company, which includes Renault's ear operations. At the same time, Renault became the owner of a 25-percent inter- est in Volvo Car Corporation.

Trucks. Volvo is the world's secood- largest producer of heavy ( Class 8) trucks.

Through Volvo Truck Corporation, a Group subsidiary, Volvo designs, manu- factures, assembles, markets and services four basic ranges of Volvo trucks. Volvo also manufactures certain key compo- nents for its truck production. Excluding the former Comecon countries and the People's Republic of China, Volvo's share of the world market for trucks with a total weight of more than 16 tons was estimated at eleven percent in 1990.

In 1987, Volvo and General Motors Corporation formed jointly owned cam- panies in the United States and Canada combining the two companies' North American heavy-truck operations.

Volvo trucks are also assembled in Sweden, Belgium, Great Britain, Brazil, Peru and Australia.

Effective January l, 1991, AB Volvo owns 45 percent of Renault Vehicules Industriels S.A. Renault owns a correspond- ing equity in Volvo Truck Corporation.

Buses. Volvo is the seeond largest manu- facturer of heavy buses and bus chassis within the OECD countries.

Volvo Buses designs, develops, manu- factures, assembles and markets bus chassis, buses and components under the Volvo, Leyland and Steyr trademarks.

Volvo's share of the market for heavy buses in the OECD area was eleven per- cent in 1990.

Volvo acquired all of the shares of Leyland Bus Group Ltd. in 1988. The purchase included rightsto the Leyland trademark In 1990 Volvo Bus Corpora- tion and Steyr-Daimler-Puch AG, Aus- tria, formed a new jointly owned com- pany, Steyr Bus GesmbH, to which Steyr transferred all its bus activities. Steyr is the market leader for city and intercity buses in Austria.

The main productian facilities are situ- ated in Sweden, Great Britain and Brazil.

Body productian plants are situated in Sweden, Great Britain and Austria. Ef- fective January l, 1991, Volvo Bus Ca- operation is a subsidiary of Volvo Truck Corporation.

Effective January l, 1991, AB Volvo owns 45 percent of Renault V ehicules Industries, in which Renault's bus opera- tions are conducted. Regie Nationale des Usines Renault S.A., in tum, owns an

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Volvo in Brief

equal percentage of Volvo Truck Corpo- ration, the paren t company of Volvo Bus Corporation.

Marine and lndustrial Engines. AB Volvo Penta, also a Group subsidiary, designs, manufactures, markets and services en- gines, transmissions, accessories and equip- ment for the marine and ffidustrial en- gine markets.

Aerospace. Through the Group sub- sidiary Volvo Flygmotor AB, Volvo is engaged in the development and produc- tion of jet en gines and components for military and commercial aircraft and for space projects. In addition, its commer- cial engine overhaul business has been ex- panded substantially. Volvo Flygmotor also has a growing number of commer- dal non-aviatian products, including specialized hydraulic machinery, gas turbines, heaters for boats and vehicles, and transmission systems.

Food. The food activities of Volvo were, prior to the end of J une 1990, conducted through Provendar AB, a former Group subsidiary.

In J une 1990, Volvo exchanged all its Provendarshares forshares in Procor- dia. Provendar now forms a part of the expanded food division of Procordia.

Other Operations. The Group's other operations include the dealer and con- struetian equipment operations in certain Group companies, the Volvo Group Finance campanies and ear insurance and reinsurance operations related to Group risks.

The greater part of the Group's finan- dal activities are coordinated in the

Volvo Group Finance companies. These campanies are active in the Financial markets with a view to creating surplus value for the Group as a whole.

lovestments in associated companies.

Besides the cross-ownership with Renault, Volvo has substantial shareholdings in campanies in the food and pharmaceutical seetars (Procordia), in the construction equipment field (VME), and in other as- sociated campanies (most of the m linked to Volvo's industrial operations, as weil as some investment companies) in which Volvo's holdings range from 20 to 50 per- cent.

Most of the associated campanies are Iisted on the Stockholm Stock Exchange.

Volvo's investment in Iisted campanies as of mid-June 1991 included:

• a 43 percent interest in the voting power (39 percent of the equity) in Procordia, the paren t company of the new ly en- larged Proeardia group with operations in pharmaceuticals/biotechnology, food and services;

• a 37 percent interest in AB Catena, whose operations include a dealer network that retails Volvo's transport equipment and other products in the Nordie area and within the European Community;

• a 20 percent interest in Saga Petroleum a.s., a publicly traded Norwegian compa- ny (See also Recent Developments on this page). Saga partkipates in con- cessions for oil and gas in the Norwegian seetar of the North Sea and operates cer- tain of these concessions;

• a 27 percent interest in the voting power (24 percent of the equity) in AB Custos, an investment company with substantial interests in publicly traded

Swedish industrial companies, real estate campanies and banks; which also owns nine percent of the v oting power (four percent of the equity) of AB Volvo;

• a 47 percent interest in lovestment AB Card o, an investment company with op- erations in the industrial equipment and medical equipment areas and a diversi- fied investment portfolio, including five percent of the voting power (two percent of the equity) of AB Volvo; and

• a 36 percent interest in Protorp För- valtnings AB, an investment company with substantial interests in publicly- traded Swedish construction and build- ing materials companies, which also owns four percent of the voting power (two percent of the equity) of AB Volvo.

Volvo's other major investments in asso- ciated campanies include.

• a 30 percent interest in Volvo Car BV, Netherlands, 70-percent owned by the Dutch Government. Volvo Car BV pro- duces Volvo cars in the medium-size 400 series;

• a 50 percent interest in VMEGroup NV, a holding company formed by Volvo and Clark Equipment Company, which includes the former construction equip- ment businesses of Volvo and Clark;

• a 26 percent interest in Park Ridge Corporation, the parent company of Hertz Corporation, the world's targest ear rental company;

• a 30 percent interest in Synergas A/S a Norwegian investment company; and

• a 40 percent interest in the voting po- wer (25 percent of the equity) in Pleiad Real Estate AB, a property management company.

Recent Developments

Negotiations Regarding Volvo Car BV.

In May 1991 a letter of in tent was signed by the Dutch Government, Mitsubishi Motors Corporation and Volvo Car Cor- poration. Under terms of agreement, Volvo Car Corporation and Mitsubishi Motors Corporation are planning joint productian of new ear models in the Netherlands in a restructured company based on the present Volvo Car BV. The Dutch Government plans to sell parts of its holdings to Mitsubishi and Volvo Car Corporation so that each party will have a one-third interest. The parties intend to conclude a definitive agreement in the near future.

Sale ofShares in Saga. In June 1991 Volvo reached an agreement with Statoil, a Norwegian oil company, in respect of the sale of approximately 12.5 percent of the voting power and 9.4 percent of the equity, in Saga. In addition, Volvo has appointed another party to use its best efforts to place approximately 4.8 million additional A Shares.

The sale is, and the proposed sale will be, contingent upon certain concessions being granted by the Norwegian govern- ment. Assuming the consummation of these two transactions, Volvo would continue to hold 2.4 percent of the voting rights and 6.7 of the equity in Saga.

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Volvo in Brief

Productian facilities

The Group's principal productian facili- ties are located in Sweden, where Volvo has assembly plants for cars, trucks, buses, marine, industrial and aircraft engines, as weil as factories producing such vital components as engines, gear- boxes, axles, brakes and bodies.

Increased emphasis on productian outside Sweden in the form of assembly operations, with the main components being delivered from the Group's Swed- ish factories, is a response to the need for close contact with major markets. lt also reflects the natural desire of some countries to have part of the manufactur- ing or assembly work carried out locally.

Volvo has established wholly owned assembly plants in Belgium, Great Brit- ain, the United States, Canada, Brazil and Australia, and partly owned plants in the Netherlands, Iran, Malaysia, Thai- land and Peru.

Assembly work is also carried out in other local facilities in Greece, Portugal, Morocco, Kenya, Mozambique, Venezu- ela, Indonesia and Australia.

Cars have been assembled in the Tors- landa plant in Göteborg since 1964. The smaller Kalmar assembly plant was com- pleted in 1974 and expanded in 1987.

Productian started in the assembly plant in Uddevalla in the autumn of 1988. Both these smaller plants represent a develop- ment of new productian methods and new forms of work organization which in effect do away with assembly Iine tech- niques.

Productian in Belgium started as early as 1962. Volvo has additional ear assem- bly plants in Canada, Malaysia, Indonesia,

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and Thailand. Volvo Car BV's assembly plant is in the Netherlands.

Trucks have been assembled at the Lundby Plant in Göteborg since the late 1920s. At the end of 1981 assembly oper- ations started in the Tu ve plant also in Göteborg. Truck cabs are manufactured in the Umeå plant.

In Europe, trucks are assembled in Belgium and in Scotland.

Assembly of bus chassis started in Brazil at the end of 1979 and truck as- sembly operations began during the seeond half of 1980. Volvo do Brasil has been a Volvo subsidiary since the end of 1985.

Volvo also has truck assembly facilities in Peru and Australia. In the United States, Volvo GM Heavy Truck Corpo- ration has three assembly plants, located in Virginia, Utah and Ohio, and one truck- cab factory, located in Ohio, where a new assembly plant for the WHITEGMC models was placed in service early in 1989.

The first bus chassis were produced in 1934 and a separate bus chassis plant in Borås, Sweden started production in 1978. Early in 1988 Leyland Bus Group Ltd. in the U.K. was acquired. Leyland has two factories in Farington and Work- ington. A new central warehouse was completed early in 1990. Bus chassis are also manufactured in Brazil and assem- bled in Peru and Australia.

Bus bodies are built in Säffle, Sweden;

Workington, Great Britain and Vienna, Austria.

Volvo Penta marine and in dustrial engines are produced in Skövde, where

this subsidiary has its origins. Some en- gines are converted in Göteborg for spe- cial applications, others are manufactu- red in Vara, Flen and Köping (transmis- sions).

Volvo Penta engines are also converted and manufactured in Chesapeake, Vir- ginia, in the U.S., as well as in Rio de Janeiro, Brazil.

Ever since Volvo Flygmotor was founded in 1930, it has produced aircraft engines for the Swedish Arrned Forces;

some engines are manufactured under license agreements with such foreign pro- ducers as Pratt & Whitney and General Electric Company in the United States.

Cooperation agreements with these companies, as well as the Garrett Corpo- ration in the U.S. and Rolls-Royce Ltd.

in the U.K., are focused on the produc- tion of commercial aircraft engines.

Volvo Flygmotor's productian and overhaul facilities are located in Troll- hättan and Arboga, Sweden.

Capital expenditures and Research and Development

Substantial resources have been allocated for product development in recent years, and this trend continued in 1990. Re- search and development costs have in- creased significantly during the last decade and will continue to be high as product programs for the 1990's are implemented.

During the most recent five-year period Volvo has invested more than SEK 22 billion in new plants. Of this amount approximately SEK 13 billion was attributable to the Cars operating sector, which has invested more than SEK three billion in pain t finisbing plants and processes since 1986. The most notable projects are the new pain t finisbing plant and the new phosphate treatment and electro-coating facility at the Tarslanda plant in Göteborg. To fur- ther improve the exterior environment, water-based paints have been introduced for use on ear bodies. In addition, Volvo Cars has built a plant that will use solvent- free materials to coat the undercarriages of cars. The assembly plant in Uddevalla, built at a cost of more than SEK one bil- lion, was completed in 1989. Gradual modernization of the final assembly plant at T orslanda has also been under way since 1986. The capacity in the ear plant in Ghent, has been expanded sub- stantiall y. A first stage of an on-going ex- pansion of the gasolin e engine plant in Skövde was completed during 1990. Sig- nificant expansions are also in progress at other component productian facilities.

In total, investments amounting to ap- proximately SEK five billion have been made in plants that manufacture compo- nents during the most recent five year period.

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:~ Volvo in Brief

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Capita] expenditures by operating sector in 1990 were as follows:

SEKM Percent

Cars 3,048 66

Trucks 990 21

Buses 116 3

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Marine and industrial engines 87 2

Aerospace 145 3

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Other operations and earparate

capital expenditures 212 5

Total 4,598 100

Capita] expenditures which bad been approved but not yet implemented amounted at year-end 1990 to SEK 7,000

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M. Projects totaling approximately SEK 3,500 M are scheduled for 1991, and approximately SEK 3,500 M for 1992

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The dis~ribution of these capita] ex-

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penditures, by operating sector, was as follows:

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^{Cars 3,400}

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Trucks and Buses 2,400

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^j~ Marine and industrial engines 300

Aerospace 400

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ccrporate investments 500

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Sales organization

Volvo has a worldwidesales network with sales campanies in Sweden, Den- mark, Finland, Norway, Great Britain, West Germany, Switzerland, Belgium, the Netherlands, France, Italy, Spain, the United States, Canada, Argentina, Brazil, Peru, Japan and Australia.

AB Catena, in which Volvo has a 37 percent interest, has a number of dealerships in the Nordie countries and within the EC.

Volvo cars are sold to retail enstomers through about 2,100 dealers. The num- ber of service shops is approximately 2,700 and roughly one out of every three persons in Volvo Cars' international or- ganization isengagedin some form of enstomer -support service. S ubstantially all of Volvo's dealers are independent, and some have more than one outlet.

Approximately 20 percent of the sales outlets are located in the Nordie region, 54 percent in W estern Europe ( excluding the Nordie region), 18 percent in North America and eight percent in other markets. Volvo has 1,200 independent outlets for truck sales in Western Europe and the United States, 200 of which are outlets ofWHITEGMC and Volvo.

In 1990 Group sales by market area were as follows:

SEKM Percent

Sweden 14,303 17

Nordie area, excluding Sweden 6,368 8 Europe, excluding Nordie area 30,199 36 North America 21,463 26

Other markels 10,852 13

Grouptotal 83,185 100

Suppliers

Through Group subsidiaries, Volvo manufactures certain major automotive components, including engines, transmis- sions and rear axles. In addition, Volvo and Volvo Car BV purchase raw and semifinished materials, many components (including several major components) and numerous parts for automotive products from outside suppliers (includ- ing other automobile manufacturers).

Certain of Volvo's suppliers produce components pursuant to cooperation agreements. Although the failure of a significant supplier to provide Volvo with components or parts could disrupt vehicle productian to a material extent, Volvo believes that such an occurrence is unlikely and that its supplier arrange- ments afford it flexibility to respond to occasional shortages.

A !arge proportion of components for transport equipment is purchased outside Sweden. In 1990, approximately 26 per- cent of the value of the Group's total purchases for transport equipment pro- ductian came from Sweden, three per- cent from other countries in the N ordic area, 42 percent from other European countries, 16 percent from North America and 13 percent from other regions.

For technical and economic reasons, Volvo-designed components are often manufactured near the Volvo plant in which the part is to be used. Some parts designed in cooperation with certain spe- cialist suppliers are distributed to manu- facturers in all countries in which the Group assembles products. Group cam- panies select their suppliers carefull y and strive to maintain good working relation- ships with them.

7

Volvo in Brief

Personnel

At the end of 1990, the Group had 68,800 employees worldwide, of whom 47,300 were employed in Sweden.

The Group employed 21,500 people outside Sweden, of w horn the greatest proportion were located in Belgium, United States, Great Britain and Brazil.

The number of employees in the Swed- ish sector of the Group was 7,500 fe w er than a year earlier. The principal reason for the decrease was the sale of the Pro- vendar companies, with 6,100 employ- ees. In addition, the Cars and Trucks operating sectors reduced their work- forces by nearly 1,800 persons in Sweden.

Employees outside Sweden were 2,400 fewer than a y ear earlie r. The greater part of the decrease was attributable to employees in Provendar campanies in Denmark and Austria.

The distribution of employees by operating sector was as follows at year- end 1990:

1990

cars 33,500

--- ---

Trucks 19,250

Buses 3,700

Marine and industrial engines 2,650

"--- - - -

Aerospace 3,800

Other operations and central services 5,850

Total 68,800

---~

8

The decline in sales during 1991 has re- duced the need for manpower. Under the pressure of this declin e, among other factors, Volvo companies have iDereased their efforts to reduce the consumptian of resources through greater efficiency in all segments of development, productian and marketing.

Volvo introduced a freeze on hiring in Sweden during 1990 and began cutbacks in personnel. In addition, employees were reassigned and work schedules were changed. Opportuni ties for early retirement, offered to employees in Swe- den who were born in 1931 or earlier, we re accepted by mo re than l ,000 facto- ry workers and staff personnel.

Continuing cutbacks in the number of employees are anticipated both in Swe- den and other countries during 1991.

Environmental policy for the Volvo Group

A revised environmental policy for the Group was adopted during the autumn of 1989. The president of each Volvo company is responsible for implementing measures in accordance with the policy guidelines. In certain companies, envi- ronmental councils were formed and ac- tion programs for the next three.to five years were adopted. The first interna!

environmental audit was carried out at the Volvo Olofström Plant during 1989.

Six additional plants were scrutinized the same way during 1990, to be followed by another seven plants in 1991.

Nearly SEK one billion of the capita!

expenditures in 1990 can be attributed to programs designated to improve the in- terior and exterior environment.

A growing percentage of the Group's expenditures for property, plant and equipment is motivated by environmen- tal considerations. lrnproved cleaning equipment, more environmentally accept- able manufacturing processesand the use of new materials are becoming in- creasingly important factors in eval- uating the need for investments.

The new finisbing plant in the Volvo T orslanda plant is expected to be placed in service during 1991. The new plant enables Volvo to change over completely to the use of waterborne paints for metallic colors in the first step and also solid colors in the near future thereby re- ducing hydraearbon emissions. To fur- ther restrict the discharge of hydrocar-

bons, a new solvent-free material for Ull-

derbody seating was introduced, effecti- ve January l, 1990. Volvo is the first ear manufacturer in the world to use this material for the greater part of cars' un- dercoating. The program to eliroinate the use of CFCs was accelerated to achieve this objective, if possible, more rapidly than required in accordance with Swedish law, currently the strictest in the world in this area. By me ans of these and other measures, the emission of solvents will be reduced by more than half, from 3,000 tons in 1988 to a maximum of 1,100 tons in 1992. Volvo has also expressed its firm ambition to reduce the figure to 700 tons by 1996, and to 450 tons by 1998.

-.,

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Financial Statistics, Consolidated

statements ofIncome

-- -· - - - -

Balance Sheets, December 31

1980-1990

Page

10 1980-1990 11

---·--- ---·-- -- - - - - ---- - ---

Statements of Cbanges m Financial Po!;ition

1980-1990

12 Quarterly !>alef) and income

1980-1991

13

-- -·- -- - - - - -- - - - - - - --- - - ·----

- --- - - - -· - - -

Capital expenditures by operating seetar Capital expenditure8 by market area Research and development costs

1980-1990 1980-1990 1980-1990

14

- - - - --- -- --- --- - ---· ---

Sales by operating seetax Sales by market area Exports from Sweden

1980-1990 1980-1990 1980-1990

15

- - - - - - - -· - - - - ---

lncome by geograpbical area

Asse~ by geographical area

1980-1990 1980-1990

16

--- - - - -

Operating income by seetar

A~sets by seetar Return on capita!

Key Financial Ratios

1980-1990 1980-1990 1980- 1990 1980-1990

17

18

Capitali.7.ation Dec. 31, J990 19

! '

Financial Statistics, Consolidated

f f - rf

statements ofIncome for 1980-1990 , ,

_.

,

_.

SEKM 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Comments

Sales 23,803 48,017 75,624 99,460 87,052 86,196 84,090 92,520 96,639 90,972 83,185 Untaxed reserves and allocations.

Cost of operations (22,081) (45,039) (71,032) (93,551) (79,202) (78,159) (75,699) (83,845) (87,318) (83,620) (79,997) E:ffective in 1990, as part of the program

Operating income before of adapting Volvo's financialreporting

~

depreciation and amortization 1,722 2,978 4,592 5,909 7,850 8,037 8,391 8,675 9,321 7,352 3,188 to international accounting practice, the

~ -

Consolidated Balance Sheets and Income Depreciation and amortization (676) (1 ,012) (1,297) (1,573) (1 ,402) (1,725) (2,062) (2,213) (2,293) (2,535} (2.621) statements are presented exclusive of

Operating income 1,046 1,966 3,295 4,336 6,448 6,312 6,329 6.462 7,028 4,817 567 untaxed reserves and allocations. For

r!

Restrueluring costs (2,450)

a detailed description, see the Annual Report for 1990, page 43.

lncome from equity method investments 1,015 1,322 Comparable figures for 1986-89 have

~-·

been adjusted. For practical reasons the Interest received less paid (56) (427) (564) (417) 249 421 345 677 952 734 46 tax tiability in untaxed reserves of the

~

Other income (expense) 3 132 195 86 138 110 218 1,311 213 148 147 Group's Swedish campanies has been

!

calculated on a 30-percent tax rate in all Foreign exchange gain (loss) 14 (246) {721) (226) (551) 759 445 561 (126} (60) 41 years.

lncome (loss) after financial income ^~-

(expense) 1,007 1,425 2,205 3,779 6,284 7,602 7,337 9,011 8,067 6,654 (327) Associated campanies is reported, ef-

Extraordinary items 235 1,363 193 176 313 fective in 1989 accounts, in accordance

f!":

Minority interests in Oncome) loss (56) 40 with the equity method. Volvo's shares

of earDings in associated companies, b ut

~ -

lncome Qoss) before allocations not the dividends received from them,

and taxes 1,007 1,425 2.440 3,779 7,647 7,602 7,530 9,011 8,243 6,911 (287)

are accordingly included in the consoli-

@ .

(AIIocation to) reallocation from dated income statement In the consoli-

untaxed reserves 1 (874) (704) (1,348) (2,981) (4,384) {3,330) dated balance sheet, the reported value

!! .

Taxes (83) (222) (508) (752) (1,624) (1,713) (3,074) (3,272) (3,200) (2,124) (733) of shares and participations is increased Minority interests in income (12) (46) (88) 158 (74) (13) (36) (74) (103) by Volvo's share ofthe after-tax earnings

r!

of associated campanies (reduced by

Net income Qoss) 38 453 496 204 1,565 2,546 4,420 5,665 4,940 4,787 {1,020)

amortization of goodwill and dividends received).

Minority interests in Group campanies

~

are reported, as from 1989, in such away that minority interests are eliminated ~- from income before allocations and taxes.

1. All allocations represent untaxed reserves

~

allowable in accordance w~h legislation in Sweden

e

and some other countries.

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10

~

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Financial Statistics, Consolidated

~

-~

Balance Sheets at year-end 1980--1990

·-~ ^{SEKM 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990} Due to changes in accounting principles

Assets in 1990, comparable figures for 1986--1990

~

^{Uquid funds 3,592 5,476 7,250 11,625 11,900 14,394 17,777 22,497 15,632 18,470 17,585} have been adjusted. See also comments

Receivables 4,618 8,546 10,528 10,706 13,265 11,244 12,346 12,724 13,945 15,837 15,718 on page 10.

~

lnventories 8,783 11,580 14,341 15,415 15,462 16,044 18,235 16,561 19,401 19,411 19,886 Current assets 16,993 25,602 32,119 37,746 40,627 41,682 48,358 51,782 48,978 53,718 53,189

!J

lnvestments in bonds 1,664 3,956 3,455 2,854

Restricted deposits in Bank of Sweden 38 208 221 264 1,762 2,823 1,180 1,721 4,034 5,293 2,072

Other assets 6,088 10,835 13,935 15,496 15,240 18,288 22,644 22,895 29,983 35,677 43,982

Total assets 23,119 36,645 46,275 53,506 57,629 62,793 72,182 78,062 86,951 98,143 102,097

Liabilities and shareholders' equity

Current liabilities 9,635 17,388 21,484 26,631 26,066 26,856 31,548 31,368 34,500 42,846 48,712 Long-term liabilities 4,600 8,535 10,904 9,706 9,005 9,285 15,709 17,077 18,727 17,244 i7,794

Minority interests 327 451 732 757 229 116 132 340 484 414 300

Untaxed reserves 5,717 6,458 7,846

- -

10,832 14,973 17,738

Shareholders' equity 2,840 3,813 5,309 5,580 7,356 8,798 24,793 29,277 33,240 37,639 35,291 Totalliab~ities and shareholders' equity _{23,119 36,645 46,275} 53,506 57,629 62,793 72,182 78,062 86,951 98,143 102,097

Assets pledged 2,921 5,149 5,500 5,915 3,516 3,033 2,959 1,943 1,997 2,427 2,417

~~

Conlingent liabilities 1,972 2,060 3,289 3,182 2,620 2,106 2,830 3,4i7 3,095 2,986 3,270

~

~

~

11

Financial Statistics, Consolidated

Statements of Changes in Financial Position 1980--1990

SEKM Operations Net income (loss)

Depreciation and arnortization Adjustments in untaxed reserves Write-down of fixed assets Decrease (increase) in restricted deposits in Bank of Sweden Funds provided by year's operations 1 Changes in working capital components Decrease (increase) in current operating assets:

1980 1981 1982

38 453 496

676 1 ,012 1 ,297

874 704 1,348

26 (170) (13) 1,614 1,999 3,128

1983 1984

204 1,565 1,573 1,402 2,981 4,384

(43) (1 ,498) 4,715 5,853

1985

2,546 1,725 3,330

(1 ,061) 6,540

1986 1987

2,551 5,665 2,062 2,213 2,694

1,643 (541) 8,950 7,337

1988

4,940 2,293

(2,313) 4,920

1989 1990

4,787 (1 ,020) 2,535 2,621

674

(1,259) 3,221 6,063 5,496

Receivables lnventories

(168) (3,928) (1,982) (178) (2,559) 2,021 (1,102) (378) (1,221) :....___.:...:____,;. (1,892)

__

119 (863) (2,797) (2,761) (1,074) (47) (582) (2,191) 1,674 (2,840) (10) (475)

~--~--~--~---~--~--~~--~-

lncrease (decrease) in current operating liabilities:

- - - -

Acoounts payable (27) 2,539

Advances from customers

_____

345 ___:____:__ (22)

Other current liabilities (38) 2,321

Net financing from year's operations 863 112 lnvestments (increase)

993 31 1,250

659

lnvestments in shares-net (122) (1 ,390) (1 ,624) lnvestments in property, plant and equipment, etc:

Capital expenditures (1 ,657) (2,514) (2,346) Disposals. Acquisitions and sales of campanies 24 (967} 616 lnvestments for leasing purposes

Long-term receivables and loans- net (21) (435) (378) (913) (5,194) (3,073)

399 410 (170) 231 633 403 472 (964}

---~- (49) (37) ~---~.:...:_ 9 136 (76)

____

438 243

_

357

1,858 47 513 3,617 411 510 (657) 1,750

5,671 3,667 8,331 9,641 9,601 2,210 4,219 6,283

_2_6_2___:_(2_,2_15....:.)____:_(1 ,485)

{2,397) (2,589) (183) 3,282

(674) 457 2,679 2,602

(3,506) (5)

4 3,339

(1 ,988) 666 _ _ _ _ _.>.._; (1 ,896)

(3,425) (3,864) (1 ,187) 342

114 139

3,155 6,884

(3,948) 108 (693) (3,008) (7,227)

{1 ,873)2 (9,078)

(6,281} (4,598) 698 1,983 (223}

36 121 (3,424) (5,289}

Remaining after net investments Extemal financing, dividends, etc

lncrease {decrease) in short-term loans 561 2,915 1,822 2,939 (985) 438 708 (1 '148) 1 '781 8,288 4,723 l nerease (decrease) in long-term liabilities

Share issue

lncrease (decrease) in minority interests Changes in composition of Group,

- - - -

412 3,935 2,369 (1,198)

482 608 304

89 124 281 25

(701} 280 113 1 ,368 1 '650 (1 ,483)

~---~----~--~----550 237

(528) (113) 16 208 144 (70) (114)

translation differences, etc 97

--- ---

⁽²⁰⁹⁾

(169)

18 (34) _ 4_9_.:...(1_,0_39...:...) _ _ 5_1 _ __:(21....:.0) _ _ (:._106) 112 (1,086)

(153) (1,203)

Dividends paid (169) (251) (340) (399) (411) (660) (718) (815)

lncrease (decrease) in liquid funds

and investments in bonds 77 1,884 1,774 4,375 275 2,494 3,383 6,384 (4,573) 2,337 (1 ,486)

lnvestments in bonds -net (1 ,664) (2,292) 501 601

lncrease (decrease) in liquid funds 77 1,884 1,774 4,375 275 2,494 3,383 4,720 (6,865) 2,838 (885)

12

Comments

Effective in 1990, as part of the program of adapting Volvo's financialreporting to international accounting practice, the Consolidated Balance Sheets and In- come statements are presented exclusive of untaxed reserves and allocations. For a detailed description, see the Annual Report for 1990, page 43.

Comparable figures for 1986-89 have been adjusted in the Consolidated Bal- ance Sheets and Income Statements. For practical reasons the tax liability in un- taxed reserves of the Group's Swedish companies has been calculated on a 30-percent tax rate in all years.

As a consequence of the changes in the Consolidated Balance Sheets and In- come Statements, corresponding changes have been made in the statements of Changes in Financial Position for 1987-89.

1. In evaluating funds provided by the year's oper·

ations and the degres of self-financing, it should be noted that net income has been charged with write·ups on long-term loan liabilities. (See Foreign exchange gain (loss) in the statements of lncorne on page 10.)

2. The increase in 1989 was SEK 2,340 M, of which SEK 467 M was an adjustment of stated Group vaJues in connection with the change to the ac- counting for associated campanies in accordance with the equity method.

In the Statement of changes in financial position for 1 989, the increase in Shares and participations, SEK 1 ,873 M, excludes this nonrecurring effect.

However, the latter amount includes SEK 112M, the effect on 1989 income (after tax) of the equity method.